MANILA: Chinese iron ore prices rose on Friday and were headed for their biggest weekly gain in four, as steel mills ramped up purchases amid low inventories and hopes of better end-user demand when the severe weather conditions improve.
The most traded January iron ore on the Dalian Commodity Exchange rose 2.3% to 730 yuan ($106.50) a tonne at 0250 GMT and up 7.3% on a weekly basis, on track for its biggest weekly gain since July 29.
On the Singapore Exchange, the most-traded October contract rose 2.1% to $105.25 a tonne by 0242 GMT, and spot iron ore for delivery to China assessed by SteelHome were unchanged at $105.50 a tonne on Thursday.
“Market is better than before. Now steel mills keep very low inventory. When the temperature drops, demand from end-users will come again may be in 1-2 months.
There will be more demand for raw materials,” a China-based trader said. China has experienced record high and prolonged heat in many regions, dampening construction activities which consume a large amount of steel, while power curbs to preserve electricity also hurt industrial enterprises.
Authorities in China on Wednesday said it would increase funding support for infrastructure projects, which would boost steel demand, days after it cut rates, in efforts to revive an economy hurt by COVID-19.
“The stimulus helps with market confidence, which I think is very important. But it has its limitation,” said the trader, pointing out that steel demand is still pressured by COVID-19 resurgence and weak construction and manufacturing activities.
The trader expected prices of iron ore to fluctuate around current levels, potentially increasing another $10 a tonne, but price directions will likely depend on the Chinese government’s stimulus policy.
Shanghai Futures Exchange’s most-active rebar contract climbed 0.4% to 4,096 yuan a tonne. ShFE hot-rolled coil rose 0.9% to 4,064 yuan a tonne and stainless steel increased 1% to 15,350 yuan a tonne.
Dalian coking coal jumped 2.4% to 2,021 yuan a tonne and coke climbed 1.7% to 2,670.50 yuan a tonne.
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